Dr. Perry: I'm going to provide first of all, the basis for the budget formulation to you and then talk about some of the details of the budget. And the basis reflects the change in security problems from the Cold War days when we dealt with the threats of a nuclear holocaust, blitzkrieg by the Warsaw Pact. Today's dangers, proliferation of weapons of mass destruction, instability in Eastern and Central Europe and the ethnic and nationalistic wars. These are the dangers that we face today. We have three lines of defense for dealing with these dangers. Here are the dangers -- what I call the post-Cold War dangers.

Our first line of defense is to prevent these dangers from becoming threats. I will talk to you about some of the programs we have specifically designed to prevent the dangers from becoming threats. If they become threats, then we have a whole set of programs to deter those threats from becoming military conflict. And then finally, if they become military conflict, we are prepared to fight and to win.

So, I will describe first of all, the programs involved in preventing dangers from becoming threats and then secondly, the set of programs we have that are designed to deter and to allow us to fight and win if we have to fight a war. All of these are designed to protect U.S. security.

Starting off with this emphasis on..., preventive defense is one of these three lines of defense that I've talked to you about. We have had all during the Cold War an emphasis on deterrence. I want to start off instead with the emphasis on preventive defense. This is what Les Aspin referred to several years ago as `defense by other means.' These are the four components of reducing the nuclear threat from the former Soviet Union, preventing the new nuclear threats from emerging. This is our anti-proliferation program. We encourage defense reform and confidence building measures in the newly emerging nations in Eastern and Central Europe, and we build defense-to-defense relationships.

Now, this first chart over here illustrates the military-to-military confidence building. A very major effort of ours. It includes the Partnership for Peace, defense and military contacts. The Defense Ministerial of the Americas that we had last July in Williamsburg. We have bilateral working groups with dozens of nations. We have international military education and training programs that involve literally thousands of senior officers of other countries training here. And, of course, bilateral exercises.

This represents a Partnership for Peace exercise that was done at Fort Polk, Louisiana, last summer in which 14 different nations participated in a peacekeeping exercise.

Besides that, we have the partnership -- defense-to-defense contacts we make with nations all over Eastern and Central Europe. And one very interesting and important component of that is we have formed partnership relations between State National Guards and Eastern and Central European countries. Twelve different countries in Eastern and Central Europe. Nine in the former Soviet Union have formed a partnership relation in each of those nations. For example, we have a partnership relation between Kazakhstan and Arizona. The Kazakhstan Defense Minister visited here last week. When he finished his visit in Washington, he went to Arizona and met with the Arizona National Guard out there. Albania, we have a very important partnership relation with the National Guard of South Carolina, who helped them rehabilitate a military hospital in Albania, a project last summer.

So all of these are very important as a way of building the defense-to-defense relationships with Eastern and Central European countries. Perhaps most significant is the relation, defense-to-defense relationship we're forming with Russia. This represents the exercise at Fort Riley, Kansas, which is the fourth bilateral military exercise that we have had with Russia. And this is General Grachev and myself at that meeting, meeting with Russian and American soldiers at Fort Riley.

This is the picture when Minister Grachev and myself came to an agreement on Russian participation in IFOR, the NATO process. And this is General Joulwan and General Shvetsov who had negotiated this arrangement, and Minister Grachev and myself as we signed the agreement for Russian participation in IFOR. All very critical to our preventive defense relations.

And a very important development in the Russians..., in the relationship we have with the Russians is the denuclearization, accelerating the removal of the missiles, the nuclear warheads, and the launchers. This shows you a series of pictures. One in March of `90, all at the same location at Pervomaysk. The first where we oversaw the removal of the warheads in March 1994. The second where we saw the SS-19 missile being taken out for dismantlement in April `95. And then finally, just two months ago, I went to Pervomaysk where we participated in the destruction of the silo. In fact, this is the key that I, Minister Grachev and Minister Shmarov used to simultaneously turn the detonator which blew up this SS-19 silo. This is the souvenir I have from that very interesting day.

Besides the denuclearization within the former Soviet Union, we are very much concerned on actions to reduce the probability of nuclear weapons and other weapons of mass destruction proliferating to other countries that do not now have them. An extensive program of that. It includes the denuclearization of Ukraine, Kazakhstan, and Belarus because of the danger of nuclear material or weapons going from those countries to aspiring nuclear nations.

Project Sapphire which is a purchase of the highly enriched uranium in Kazakhstan, improved warhead security in Russia. The North Korean framework agreement was very important in this anti-proliferation. All of these programs are key to preventing the threat from emerging to us.

Nevertheless, whatever we do in prevention, we may still have the threat materialize, and therefore, we have a major emphasis on deterrence. You're all familiar with the deterrence as it was employed in the Cold War, the mutual assured destruction. Today, it is very different but still very important. It involves both the capability which we achieve through having the weapon systems and the training and the credibility to use it. Deterrence does work in this modern world. Key examples of that continue to work in Korea, work even through the crisis we had in June of `94 where we feared that they were going to nuclear weapons. It worked very impressively in Iraq in October of `94 where the very rapid deployment of military systems prevented the movement of Iraqi forces down to the Kuwaiti border and provided a deterrence to their actual crossing and starting another DESERT STORM.

Even if our deterrence is successful, we still have to be concerned with a military conflict arising. We still ought to be concerned about our ability to defeat it. And when we have vital interest involved, as we did in DESERT STORM, we are prepared to use those systems. We also -- there are many cases where there are important interests involved -- Bosnia and Haiti being two cases in point -- where we deployed military forces, but in a peacekeeping operation, not in a military conflict. And finally, the example of Rwanda, which this depicts, where humanitarian interests involved with sufficient extent that we use our military forces to assist in relieving the humanitarian disaster.

So for all of those reasons, we might use military power and therefore, the bulk of the programs which are in this `96 -- in this budget submission, the bulk of the programs are to provide the capability to maintain the deterrence and to have a war fighting capability. And these are the five components of achieving that.

We have to maintain the force structure. We have a forward deployment of some of that force structure. We have to be able to project the power of the remaining forces of the United States. We have to maintain the readiness of all of those forces. And finally, the weapons systems. And I will talk about each of these in turn in how they are affected by this budget.

Force structure. This was the Cold War base. This is what it is -- will be in 19 -- fiscal `97 by what this budget will support in fiscal `97, and these are our long term goals. I'll just read a few of these numbers. In the Army active divisions; ten. And then we have five equivalent divisions in the ready reserves that are maintained in enhanced readiness level. Marine Corps; three active, one reserve division. In the Navy; 357 ships of which 11 are active duty carriers. One reserve carrier. And Air Force; 20 wings of which seven are reserve. This is the force structure that we will have in `97, and it projects into the future.

Of that force structure, we will have 100,000 troops, approximately, stationed in Europe, another 100,000 in the Western Pacific, about 20,000 in Southwest Asia and about 10,000 on the average are stationed or deployed in the SOUTHCOM area. So, we have approximately 230,000 of our force structure forward deployed in this way. The forward deployment is crucial to our strategy, both because of the presence, because of the deterrence value of their presence and because if we get in a conflict, these are the first troops that are going to be able to engage in it.

We have to also project from the United States because those 230,000 are not enough to fight a major regional conflict if we were to get in one. The power of projection. This chart simply illustrates why it is a big problem for us. Our forces

-- our five in Fort Lewis are 5,000 miles from Korea. Our forces in Fort Bragg and Fort Hood are 8,000 - 9,000 miles from Southwest Asia. So, we have a substantial problem in projecting this power forward.

These are the systems that affect this projection. This represents the new fast sea lift ship, the BOB HOPE. This, of course, is the C-17 which performed fantastically in Bosnia. And this is something not well known or understood. This is a picture in one of the warehouses where we have our prepositioned equipment. We have a brigade, for example, of heavy armored equipment in Kuwait so that if we get into a conflict in Kuwait, we could rapidly marry up this equipment with the soldiers coming in from Fort Stewart, Georgia, and be ready for a conflict in a matter of a few days.

Our first priority is protecting readiness. I have said this at the two previous briefings. I say it again at this one, and that is reflected in our budget. In order to affect this readiness, and readiness, by the way, I have also briefed you before, means not only the training which is a key to the near term readiness, but the qualify of life of our military forces which is a key to the medium term readiness. And therefore, we emphasize in our readiness both training and the quality of life, and the budget projects substantial resources for both of those.

Now in order to maintain the readiness, we do have to have the `96 supplemental reprogramming actions approved because the actions now underway in Bosnia are presently being funded out of the existing `96 budget which was intended for other purposes. And so, this supplemental reprogramming will replenish those funds so that we will not have to use the funds that are set aside for training to conduct ongoing operations. In fiscal `97, for the first time, we have put in the funds for those operations which are already planned. The ongoing operations in Bosnia and in Southwest Asia, we have more than a billion dollars in this budget to accommodate those programs so that we will not have to come back in fiscal `97 for supplemental or reprogramming for ongoing operations, but only for true contingencies.

We are continuing our robust operations and maintenance funding. In fact, this year, the last three years, in fact, the O&M funding has historically high levels as measured in dollars of O&M per end strength, which is a reasonable way of trying to normalize this funding. It's about 10 to 20 percent higher than it was at any time during the 1980s. We continue to monitor and manage readiness, and we continue to emphasis the quality of life.

All of this leads finally to the weapons systems, and I want to describe to you six different aspects of weapons systems and how they are affected in this budget. Nuclear deterrence, ballistic missile defense, air, sea, and land dominance, and I'll talk more about those, and battlefield awareness. I have organized the programs in this budget in those six categories, the first one being nuclear deterrence. Our nuclear posture review indicated we could get by with a smaller force but a force which ought to be safer. There was an emphasis on making this force less susceptible to accidents. But, we needed to maintain a force large enough that we could assure nuclear deterrence. This chart represents how that is proceeding. This represents 1990 on into the next decade, and the top red line represents the number of nuclear warheads in our forces, strategic forces here. And you see them moving from 11,000 down to 6,000 scheduled to be about 1998. This is under the START I Agreement. And we have been moving actually ahead of schedule that's called for in that treaty.

Now from this point onto 2003, we project going down to about 3,600 which is the level in START II assuming that START II is ratified by the Russian Parliament. This chart reflects on here with these blue arrows off ramps on that plan namely going back to the START I levels if there is a need for reconstituting the force or if geo-political events are moving positively actually making faster and deeper reductions. But this is the chart that describes our present planning relative to our nuclear deterrence.

Now, the next chart gives the National and the Theater Missile Defense. The National Missile Defense, our assessment is that we do not now have a threat, but that one could emerge, and we have to have a readiness to be able to deploy for that. The budget which is presented here plans for that readiness in three years time. That is, it continues the research and development at such a pace that in three years we would be able to make a deployment decision on that system. And what this chart reflects is when we reach that date, we could either deploy at that time and thereby get this deployed capability or we could defer the decision depending on two things -- the geo-political decision and also, what our technical views were as to what the best National Missile Defense system might be at that time.

Now, I want to emphasize that the funding is in this program to take us up to that decision. The funding is not in the program for the deployment itself. If we decide to deploy in three years, there would have to be funding added to the budget in order to accommodate that deployment.

In the case of Theater Missile Defense, the situation is quite different. The threat we assess is here and now. And therefore, this program, this budget funds for a rapid deployment of evolutionary systems and in particular, the PAC-3, the Patriot system which is the ground-based system, and the standard missile on the Aegis, and these two bubbles schematically represent the coverage area of those two systems.

In addition to that, the budget includes funds for a deliberate deployment of the next generation systems which are the wide area theater-wide Navy system and the so-called THAAD system which is a Theater Army Air Defense System for the Army, both of which are substantially improved over the systems which we are now building for deployment. So, two different thrusts in this budget. The first is an accelerated deployment of the evolutionary systems until we get what our CINCs have asked for, which is a rapid deployment of a system that has improved over the present Patriot and that we move deliberately towards the next generation system.

We have $10 billion dollars in the Future Years Defense Program for these Theater Missile Defense systems. Only two billion dollars for the National Missile Defense systems. So, you can see a very substantial emphasis in the program in the Theater Missile Defense.

The next two charts deal with what I call air dominance. For decades, we've described our objective as air superiority. In DESERT STORM, as this chart illustrates, what we had was not air superiority but air dominance. That once we actually started -- this represents the sorties of the Iraqi Air Force prior to the beginning of the shooting war. This represents after. Basically, the Air Force simply shut down the Iraqi Air Force and therefore, our ground forces, all of our other forces were able to operate without any interference from Iraqi air. This is what's called air dominance. We had it in DESERT STORM. We liked it, and we want to continue to have it in any future military conflict. And therefore, our objective is to have not just air superiority, but air dominance. This is the program that achieves that.

Now, I've called this out to your attention particularly because there has been some criticism already on an over-emphasis on tactical air, pointing out that we already have air superiority, why do we need to put so much emphasis on air? It is that we believe that everything we'll do depends on having this air dominance, and further, we recognize that rather advanced airplanes like the MiG-29 are appearing all over the world today. In Cuba, for example, it was a MiG-29 which shot down the Brothers to the Rescue just a week ago. That's not to reflect the capability of the MiG-29. It's just to reflect the fact they have them, and they train with them, and they have the missiles that go with them.

This is intended to maintain air dominance so that any future military conflict, we will be able to achieve this sort of a situation. It includes substantial funds for the F-22 -- two billion dollars in `97, 11 billion dollars over the next four years. It includes beginning of the Joint Strike Fighter with three billion dollars in the FYDP. It includes substantial funding for the F-18E/F. Next generation Navy aircraft, 2.6 billion dollars in `97 and 14 billion dollars including 150 aircraft over this program. That includes the substantial funding also, five billion dollars together here for the V-22 program.

So, this is a significant commitment to tactical air, and it is because we judge we need air dominance. We also have and believe we want to continue to have sea dominance. And this chart represents what we are committing to get -- to maintain our sea dominance. In this chart, I've listed `96 as well as `97 because there was a large number of -- we buy ships in lumps. We don't buy them in even numbers every year. And there was quite a large investment in ships made in fiscal `96. A significant but not as large an investment in `97 and still significant investment over the Future Years Defense Program.

The next chart talks about the importance of maintaining land dominance, and these are the programs involved in maintaining our land dominance. The tanks, infantry fighting vehicles, trucks, Longbows, AV-8s. I have PGMs listed at the bottom here because they are very critical, we believe, to maintaining the dominance of our land forces.

Now all of this air, sea, and land, in order to make it truly effective requires battlefield awareness. Again, in DESERT STORM, we had it, we liked it, and we want to continue to have it. This chart, this cartoon is suppose to illustrate what's involved. This is a picture of a Predator UAV, but it could be any sensor that is looking at the enemy deployments on the ground perhaps with a radar, perhaps with a camera, an imaging system. It then takes the data and in real time relays it to a satellite back down to a tactical command center. And that tactical command center takes -- synthesizes the data, compares it with other inputs and sends it out to our deployed forces in the field who then face this opponent armed with detailed knowledge about where and who and how.

So, this is what we call battlefield awareness. It is the crucial difference. It is the edge which gives our forces an unfair competitive advantage in any combat that they're involved. These are the programs which give us battlefield awareness. Quite a list of them here. And if you add this up, you see it's quite a sizable funding. It's about three billion dollars a year we spend on battlefield awareness. And that is -- those programs are projected on out into the Future Years Defense Program. It includes sensors like Joint Stars and AWACs. It includes position locating systems like global positioning system. Communications systems like the global broadcast system and MILSTAR. Army digitization allows us to get the data from these sensors out into the tactical units in the field.

All of those programs are expensive, and we have been in a decline in our procurement program, and this simply lays it out. These are the last three years that I have prepared the budget. We have more or less held the line from this decline down here but still have not gotten it to go up again, and the projection is running ramping this back up again in the latter part of this decade so that this real decline of 60 percent which occurred from here to here, it will recover 40 percent of that, take us back to the 60 billion dollars which we judge to be sufficient to sustain a steady state of adequate modernization.

Now, I have argued -- I have made the point to you before, and I will repeat it again, that even though we have had this decline here, the quality and the age of our equipment has not been declining. It's because this decline in spending on replacement equipment, this is the modernization budget, has happened at the same time that we were reducing the size of our force and therefore, taking the older equipment out of field, and this one chart tends to illustrate that. This is the same time period as this chart. And you can see that from here to here when that great budget decline was taking place, we were pretty much holding our own relative to the average age, in this case, it happens to be Air Force tactical equipment, but we have charts like this for all of the major categories of equipment.

This band here represents an acceptable band of aging. Basically, this is the one-half service life range. When it gets above this line, we start to get concerned. And if you're concerned about it being above this line, you have to start taking actions three, four, or five years sooner than that. And that means then that we have to start now acting so that this line does not go above here, and we can bring it back down again. That means we have to start ramping up our modernization program.

The success in bringing our modernization program up which is reflected in this line, depends on three results, and this next chart will illustrate those. We have to sustain that topline. We have to be able to harvest the savings from BRAC and privatization, and we have to be able to harvest the savings from acquisition reform. I'm going to talk about each of these three in turn.

Let me go first of all, to the topline. This is the topline budget. And you can see that for the next five years, it projects essentially a steady state in the budget in real dollars with actually a slight increase. Our plans for recovering and getting our modernization back so that we do not go into a decline on the aging, hinges on being able to sustain this topline. It also hinges, as I said, on success in BRAC, and let me show you that.

This is the first time I've had this particular chart put together, and I think it illustrates in one graph the whole arithmetic of BRAC. The topline and the bottom line here represents the costs of closing down bases. The topline illustrates the savings, and the blue line then is the net. Now, up until this year, this has been a net cost. Every budget we have had to pay for BRAC, and this year, for example, in BRAC, fiscal `96, we were paying almost four billion dollars in BRAC. So, it's a very heavy expense.

The savings in `96 was less. But, as you can see from this chart here -- I'm sorry, `95 I was talking about -- in `96, as you can see from the chart here, we have the peak costs. We also have savings starting up, and for the first time in this fiscal year we will break even on BRAC. And from there on in, it will be a net savings. I have three numbers on here that represent the fiscal `97. The numbers in this budget. We have budgeted for 2.8 billion dollars costs in this budget, fiscal `97 budget. We are expecting 4.5 billion dollars worth of savings, and so the net savings this year is 1.7 billion dollars. And this money essentially will go into modernization. And you can see that in the out years that continues to go up. It goes over 4 billion dollars towards the latter part of this period, and it's on its way up to 6 billion dollars.

So, we will make a very substantial contribution to our modernization program by harvesting this money, and `97 will be the first year where we realize the benefit from that. `96, as I said, is a break even year.

Now, the other way -- the other means we have to harvest from is from our acquisition reform. I have briefed you many times before on acquisition reform, and in the last two budgets, I have cited savings coming in acquisition reform, but said I was not able to put a number to it. This year, we are able to start putting numbers to it because we have had some results. I'm going to give you three specific programs just to show you what is actually happening in acquisition reform.

This is a tactical communications terminal for MILSTAR which the Army is buying. And this is a very good example of acquisition reform. The first estimate of cost for this program was 790 million dollars. The government then went in and asked for competitive bids and got the cost down to 660 million dollars. And when we started looking at this from an acquisition reform point of view, we were looking at a 660 million dollar cost. We made a trade off then. We went into acquisition reform, and we changed both how we bought it, specs, reduced daily requirements, failure free warranty, and so on, and what it was we were buying. We did a trade off. We did, for example, remove the requirement for nuclear hardening on this vehicle.

Now, with all of those changes, this resulted in a final contract..., now ultimately resulted in a contract this year for 250 million dollars. And so depending on what your baseline is in comparing, we saved something more than half of the original cost of this. So, it makes the point which I have made to you in briefings before about acquisition reform. We're not talking about five percent or ten percent savings. We're talking about really significant savings. The total cost of this program was reduced more than half by introducing the acquisition reform.

Now, I show you this example first, not because it is the biggest one, and it certainly is not, but because these are real dollars. This is already a firm fixed price contract which has been let. And so, we know that this is a real savings in the program. Now, let me go to two other examples. The next one is JDAM, the Joint Direct Attack Missile. This was started only in 1994, and it was a pilot program for acquisition reform. We specifically took on this program to show what we could do. We used commercial practices. We made it exempt from government-unique requirements, and in the course of working this program, the unit cost of one of these missiles went from 42,000 dollars down to 14,000 dollars.

We are going to be buying actually..., was using this savings partly to save money in the budget and partly to buy more JDAMs. But the cumulative savings and cost avoidness over the life of this program is almost three billion dollars. So, this again is real money, and this is one of the crucial elements of our inventory in that it provides..., it takes all of the so-called dumb bombs that we have, 1,000 pound bombs we have in our inventory, puts a GPS receiver in it and a control system, and converts the dumb bomb into a smart bomb for 14,000 dollars. And you compare that with a cost of a Maverick say, which might be an alternative way of doing the same job, you also see in it cost avoidance of a different kind.

The other example I use in acquisition reform is the C-17. This was a program which was in deep trouble just three years ago. It was in danger of being canceled. The various reforms that were introduced in this program include..., finally led us through a program sound enough that we could use multi-year procurement, multi-year engine procurement. The full set of savings, and by reducing the requirement on documentation and inspection, the full set of savings on this is about five billion dollars over the cost of the program. Most of these costs are documented costs. That is, we have firm bids from the contractor now on this. So whereas a year ago, I was estimating savings, this year I can point to negotiated contracts, and we can now estimate what we're saving.

So, we are getting major successes in these programs. In addition to these three examples I've given you which are all new program starts, late last year, we extended the authority of acquisition reform to go back into programs already underway and started to introduce some of these same techniques in those programs. And we will get additional savings from those as well.

Well, let me now wrap up saying that this whole program is intended to keep the United States as the best military force in the world, and I choose this particular picture to illustrate that because it was the one that made the most vivid impression on me. When I went out and visited Bosnia in January and walked out on this bridge, halfway across the bridge, I met a group of soldiers who were just finishing this up. It was a dirty, hard, cold, exhausting job. And while I was talking to the soldiers out there, it turned out that one of them, a Sergeant First Class had just finished his term of enlistment and asked to be re-enlisted. And so, General Joulwan, General Shali and I stood out there on the bridge and re-enlisted this soldier for another four years out in the middle of the Sava River Bridge.

Partly, it is because of the specific programs that I told you about that we have the best military force in the world. The airplanes, the battlefield awareness, the power of projection forces. But partly -- but right at the heart of all of this, is the quality of our forces, and that is why in this budget as in the previous three budgets, the military personnel are first in maintaining the readiness of the forces and the quality of life comes first.

Now with that, I'd be happy to entertain questions. Charlie?

Q: Dr. Perry, defense spending actually goes down a little bit in `97 and your ramp up in procurement of new weapons and spending does not begin until `98. How do you answer Republican charges, including representative Spence's charges today that the United States can't wait even one more year to do so? And what about worries, including your own worries, that future cuts in defense spending or future cuts in overall spending as the Federal budget is balanced won't allow you to even go up beginning of `98 and years beyond?

A: I am quite comfortable with the capability -- military capability -- that will result from this program as it's described on into, not just for next year, but into the Future Years Defense Program provided, and I have these three big provisions which I will repeat again, that we do sustain the topline budget which has been proposed, that we do sustain the BRAC program which last year, I was more concerned about. This year, I'm quite confident we're going to achieve the BRAC savings, and that we achieve the acquisition reform savings. Again, last year, I was very concerned about that. This year, I am much more confident that we are having substantial success on acquisition reform. So, of those three uncertainties, the biggest one is maintaining the budget topline. That has to be sustained or we cannot achieve this modernization ramp up which I've described.

Q: Are you confident that will be done given the thrust of balancing the Federal budget?

A: I'm confident that President Clinton will support the budget which I have described to you, and whether that is sustained in Congress will depend on who and what the Congress is over the next two to four years. On balance, I would be optimistic that the Congress will support this program, and that if we support this program, I think we will have the capability which will achieve the objectives that we described and will, indeed, continue to allow the U.S. military to be the best in the world.

Q: In the aftermath of this rash of recent Navy and Marine Corps air crashes, some in Congress are questioning whether your budget is putting too much emphasis on leap ahead technologies in aircraft and not enough on the more meat and potatoes kind of projects that would make these older aircraft like the F-14 in the area safer to operate. How do you respond to that?

A: There's no issue that I am more concerned about, Bob, than the safety of our troops, including the safety of our pilots. So, this is an issue that I look very, very carefully at. But I cannot look at it on an anecdotal basis. I have to look at the statistics that bear on this question. The most impressive statistics going specifically to Navy air. Navy air, if I look at the best safety record, the best three years of safety record, they have been the last three years. `94, `95, and `96 to date, have been the three best safety years in the history of Navy air. So, that I start off with saying we're doing something right instead of focusing on we're doing something wrong.

Having said that, every individual accident has to be looked at carefully to see what lessons we can learn from it, and we are looking carefully at those F-14 accidents. It's my estimate right now from looking at those accidents that there are things that we can do, can and will do, to improve the safety records specifically of the F-14As. The F-14As, we only have perhaps eight more years of service life. But there are still some things that we can do to improve their safety, and we're looking specifically at a minor modification to the engine, and we're also looking at a modification to the flight control system which could improve that.

In the meantime, Admiral Borda has ordered some modified flight procedures to reduce the risk. So, we have to look at it both statistically, and we have to look at the specific individual accidents. And on aggregate terms, I gave you the statistics for Navy. It also turns out Air Force air also has all time lows now in terms of flight safety. We measure flight safety in terms of principal parameters, number of class A mishaps per 100,000 flight hours. Class A mishap is one which is a fatality over a million dollars worth of damage. And those are at all time low both for Navy air and for Air Force air. Yes?

Q: Mr. Secretary, if you worried about sustaining the topline, Congress is in a mood -- the current Congress is a mood to give you more money. You took the money that they gave you, you didn't ask for this year and bought something that you plan to buy later. Why not take Congress when they're in the mood to give extra money, why not take that money now, buy weapons that you want to buy anyhow, and that will cushion the fall if you don't get your topline down the line, down the road somewhere?

A: It isn't as if Congress had a printing press and could print money. The money comes from somewhere. It comes from some part of the budget, and the President's budget was put together with trying to balance out these different conflicting demands. Both the Administration and the Congress are resolved to a deficit reduction program. That's why I say we can't just print more money. We're trying to bring the deficit down at the same time.

So, simply adding more money to the defense budget means it's going to come out of some other program, some other department. It's going to hurt something else, and the President's job is to make those judgments as to how to balance those. I think he did a pretty damn good job of it, and I strongly support the budget he's put together. Yes?

Q: A couple of questions on the new attack submarine. You've omitted the money for the submarine because Congress wanted it built at Newport News. Is this a [inaudible] view in the Pentagon that only one contractor is required?

A: No.

Q: And does this at all change your plans for the weapon, how many you're going to build altogether and what you want out of it?

A: No, we -- I support and have told the Congress that I support having competition on the fast attack submarine and that includes then funding two yards to do the submarines. So, the first one will be done at one yard and the second will be done at another yard. And our program envisions that happening. The only disagreement perhaps we have with the Congress on that is what year the second fast attack submarine started. We have it for I think the year 2000. Isn't it?

Unknown Speaker: Sir, we were asked to -- we had it in the year 2000, but the legislation that was passed requires it in `99 and we didn't have funding in `99 which addresses your point. But, it is in our program. The Secretary has not changed any direction in that regard.

Dr. Perry: We will do that fast attack submarine and what the comptroller is saying is between now and `99, one will have to find a way to fund it. Yes?

Q: A question on procurement dollars. If you match up the current fiscal

-- the `96 figures the defense program calls for, we had 18 billion dollars in procurement for 2001. Your current -- the new plan calls for 295. What are some of the major reasons for that drop?

A: A major reason for the drop was the change in inflation estimate and, in fact, even though the number, second number you quoted is lower than the first number, it actually has greater buying power than the first number. Because when we had the change in inflation, the change was larger than that differential, and the President authorized us to put some of that money back in the budget. So, the buying power over the FYDP of this budget is actually greater than what we had imagined last year we were going to have. Because of that, we got some of that inflation savings back. Yes?

Q: Mr. Secretary, on Theater Missile Defense system. Could you give us a little more detail as to when the research will be completed that deployment might begin specifically with protecting Naval assets at sea from nuclear missile attack? And then finally, how the theater missiles might be used to protect the U.S. mainland from like single or rogue type missile launches against the U.S.?

A: The emphasis that we put in this program at the request of the CINCs was accelerating getting into the field these first two systems, which is the PAC-3 and the first generation Naval system. And so they are moving forward as fast as the program can move. They're not being fund limited at all. We had to put extra funds in the program to do that. And that will lead to an IOC of those two systems. Do you have those in your head, John? It's a couple of years. It's rather soon. So, the program is directed to get to IOC in those as soon as it's feasible to do it. And the next generation systems, the Navy theater-wide system which used to be called the Upper Tier system and the THAAD system are still funded in the program, but they are somewhat less priority while we get these first two systems out in the field. They will follow along as replacement systems and they will give us a much wider area coverage.

Q: Mr. Secretary, let me try one of the Congressional questions you'll certainly get this week. If given more money, what would you spend it on this year?

A: I would, first of all, tell them -- express some skepticism about whether anybody has money to give. But, if there's more money put in the defense budget, I would urge that it would be done the same as they did last year which is, not add new programs, not add programs with tails which aren't funded in out years, but rather move forward the programs that are already in the budget. This is what I asked them to do last year when they were putting more money in, and by and large, they did that. Most of the programs they added last year, with the exception of the B-2, were programs that were in our budget, and they just moved them from one year from `97 to `98 or `99 up to an earlier year.

Q: Do you have specific reservations on that?

A: No, I don't. I'm not seeking to have that outcome.

Q: An Israel question. What is the U.S. willing to do and what can the U.S. do to help Israel beef up its security?

A: We have had for years a close consultation with the Israeli defense forces, and our intelligence people have had a close liaison with the Israeli intelligence forces. Both of those will be intensified, and we'll do everything that we reasonably can to help the Israelis get through this very difficult problem. My assessment of dealing with terrorist forces is that a key to success is getting good intelligence, and so, our primary emphasis I would think of both the Israelis and any assistance we give the Israelis might be to help them in that area. Thank you very much.